Violence erupted elsewhere in the country as workers, angry about high fuel prices in particular, tried to keep vehicles off the roads. One union member was killed in Ambala, media said.

Offices and factories were shut in many places and transport was disrupted. However, New Delhi and the business centre, Mumbai, were mostly unaffected and financial markets were open.

The strike comes as the beleaguered government prepares to present an austerity budget to parliament and as it weathers a corruption scandal in a big arms deal.

Parliament begins its budget session on Thursday and the government is to present its expenditure plan for fiscal 2013/14 (April-March) next week.

Several officials have told Reuters the government plans to slash a public spending target by up to 10 percent to avoid a sovereign credit downgrade, even though that may create more economic pain in the short run.

The government is also on the back foot over accusations by Italian police that officials from defence group Finmeccanica paid bribes in a $750 million deal to sell India VIP helicopters manufactured by its Anglo-Italian subsidiary AgustaWestland.

Prime Minister Manmohan Singh, who is grappling with the worst economic slowdown in a decade and faces a general election early next year, had asked the unions to call off the strike, but they refused.

"We want the government to take note of this," said Akhtar Hussain, vice-president of the Bharatiya Mazdoor Sangh. "They think they can turn a blind eye to our demands, but they must know that enough is enough. We need our demands to be met. The government needs to be more serious."

"HELPLESS"

The strike also hit iron ore and coal production in the resource-rich state of Chhattisgarh.

"Trade unions leaders have forced dozens of workers to stop iron ore mining in protest against violations of labour laws and high inflation," an official of NMDC Ltd (NMDC.NS), India's biggest iron ore producer, told Reuters by telephone.

By noon, the company halted 60 percent of production at mines in the Dantewada district, where it produces about 60,000 tonnes of iron ore a day, officials said.

The strike also affected coal production at a mine owned by a Coal India Ltd (COAL.NS) unit in Gevra district, where workers stayed off the job in protest.

The Associated Chambers of Commerce and Industry said on Tuesday the two-day strike was expected to cause a loss of 150 billion-200 billion rupees, hurting sectors such as banking, insurance and transport.

Thousands of rail and road passengers were stranded in Odisha and Bihar as protesters blocked the movement of trains, buses and auto rickshaws.

"Protesters are squatting on the railway tracks or capturing the locomotives. We're just helpless," Amitabh Prabhakar, a public relations officer for Indian Railways' east-central zone, said by telephone.

(Additional reporting by D. Jose in THIRUVANANTHAPURAM, Jatindra Dash in BHUBANESHWAR and Sujeet Kumar in RAIPUR; Writing by Arup Roychoudhury; Editing by Raju Gopalakrishnan and Robert Birsel)

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